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Did Hedge Funds Make The Right Call On Valley National Bancorp (VLY) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Valley National Bancorp (NASDAQ:VLY) based on that data and determine whether they were really smart about the stock.

Valley National Bancorp (NASDAQ:VLY) has experienced a decrease in hedge fund sentiment lately. VLY was in 22 hedge funds’ portfolios at the end of the first quarter of 2020. There were 24 hedge funds in our database with VLY positions at the end of the previous quarter. Our calculations also showed that VLY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Now let’s analyze the recent hedge fund action encompassing Valley National Bancorp (NASDAQ:VLY).

How have hedgies been trading Valley National Bancorp (NASDAQ:VLY)?

At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VLY over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies has the number one position in Valley National Bancorp (NASDAQ:VLY), worth close to $8.8 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Millennium Management, managed by Israel Englander, which holds a $3.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions include Chuck Royce’s Royce & Associates, Ken Griffin’s Citadel Investment Group and Kenneth A. Moffet’s Hourglass Capital. In terms of the portfolio weights assigned to each position Hourglass Capital allocated the biggest weight to Valley National Bancorp (NASDAQ:VLY), around 1.18% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, earmarking 0.59 percent of its 13F equity portfolio to VLY.

Due to the fact that Valley National Bancorp (NASDAQ:VLY) has experienced falling interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of fund managers who were dropping their entire stakes by the end of the first quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the largest investment of the 750 funds monitored by Insider Monkey, worth about $5.3 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund cut about $3 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 2 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Valley National Bancorp (NASDAQ:VLY) but similarly valued. We will take a look at Perspecta Inc. (NYSE:PRSP), Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), Iridium Communications Inc. (NASDAQ:IRDM), and Advanced Disposal Services, Inc. (NYSE:ADSW). This group of stocks’ market values are closest to VLY’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PRSP 32 326939 -14
OLLI 19 96475 -9
IRDM 20 228723 0
ADSW 21 739563 -1
Average 23 347925 -6

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $348 million. That figure was $25 million in VLY’s case. Perspecta Inc. (NYSE:PRSP) is the most popular stock in this table. On the other hand Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) is the least popular one with only 19 bullish hedge fund positions. Valley National Bancorp (NASDAQ:VLY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately VLY wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); VLY investors were disappointed as the stock returned 8.5% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.